GANNETT CO., INC. 
By MCLEAN, Va., Feb. 4, 2014 /PRNewswire/ --
Highlights for the quarter on a comparable 13-week basis(1) include the following:
-- Publishing Segment operating income on non-GAAP basis was slightly
higher year-over-year
-- Television revenues 23 percent higher excluding record level of
political advertising achieved in fourth quarter of 2012
-- Digital Segment revenue up 4 percent
-- Belo Corp. acquisition completed on December 23, 2013
Gannett Co., Inc. (NYSE: GCI) reported non-GAAP earnings per diluted share of $0.66 for the fourth quarter compared to $0.89 in the fourth quarter of 2012. Results in the quarter reflect revenue growth in the Digital and Broadcasting Segments, excluding the record level of political spending in the fourth quarter of 2012 and a solid performance in the Publishing Segment. The extra week in the fourth quarter in 2012 also contributed $0.03 of the $0.89 earnings per diluted share noted.
Gracia Martore, president and chief executive officer, said, "Our strong fourth quarter results cap off a highly productive, transformative year for Gannett. From our game-changing acquisition of Belo and the progress of G/O Digital, our digital marketing services business, to the ongoing enhancements we're making to our All Access Content Subscription Model, we have fundamentally changed the composition of our company and the way in which we interact with consumers and businesses in our communities. This enables us to strongly compete across a wide spectrum in today's digital media landscape. In addition, we are delighted that during the quarter, USA TODAY regained its position as the number one newspaper in total daily circulation in the nation, reflecting changing media consumption and increased engagement with our digital platforms.
"As a result, each of our segments was solidly profitable in the fourth quarter and we continue to generate substantial free cash flow. We continue to invest wisely and remain relentlessly focused on the execution of our strategic initiatives, raising the bar on operational excellence, and enhancing the strength of our balance sheet, which provides us with the flexibility to continue to invest in our businesses and explore promising new opportunities. These accomplishments - coupled with the increased advertising demand we are anticipating in connection with the Winter Olympics and elections - position us extremely well for a terrific 2014."
Certain amounts and comparisons included in the following discussion of GAAP results are supplemented by discussions which exclude the effect of special items. Details of these special items and their effect on GAAP results are included on the Non-GAAP Financial Information Tables 6 through 11 attached to this release. The company's basis for providing discussions of non-GAAP results is detailed below.
CONTINUING OPERATIONS
All of the company's Publishing and Broadcast Segment comparative results were impacted by an extra week in 2012, which did not recur in 2013. All of the comparative results detailed below exclude both the extra week in the fourth quarter and year as well as special items, unless otherwise noted.
Operating revenues for the company totaled $1.37 billion in the fourth quarter, 6.0 percent lower than the fourth quarter in 2012. The decline reflects higher Digital Segment revenues which were more than offset by lower revenues in the Publishing and Broadcast Segments. Broadcasting Segment revenues were impacted by the absence of significant political spending which reached record levels in 2012's fourth quarter. Excluding the incremental impact of political advertising, total company revenues would have been relatively unchanged.
The table below details fourth quarter results on a GAAP and non-GAAP basis:
In thousands of dollars, except per share amounts
GAAP Special Items Non-GAAP Measure
Measure
-------
Thirteen Workforce Transformation Asset impairment
costs charges Thirteen
weeks ended restructuring weeks ended
Dec. 29, 2013 Dec. 29, 2013
------------- -------------
Operating income $213,606 $21,569 $10,081 $32,996 $278,252
Total non-operating (expense) income (66,898) - 20,985 - (45,913)
Income before income taxes 146,708 21,569 31,066 32,996 232,339
Provision for income taxes 41,500 6,400 4,200 13,300 65,400
Net income 105,208 15,169 26,866 19,696 166,939
Net income attributable to Gannett Co., Inc. 90,747 15,169 26,866 19,696 152,478
Net income per share - diluted $0.39 $0.07 $0.12 $0.08 $0.66
Net income attributable to Gannett on a non-GAAP basis was $152.5 million in the fourth quarter while non-GAAP operating income totaled $278.3 million. Operating cash flow in the quarter (a non-GAAP term defined as operating income plus special items, depreciation and amortization) was $325.7 million.
Special items in the fourth quarter of 2013 totaled $85.6 million ($61.7 million after tax or $0.27 per share) reflecting charges associated with facility consolidations, non-cash asset impairments, workforce restructuring and transaction-related fees. Results during the fourth quarter of 2012 included $118.4 million of special items ($104.2 million after tax or $0.45 per share).
Operating expenses including the special charges noted above totaled $1.15 billion in the quarter. Operating expenses on a non-GAAP basis totaled $1.09 billion, a decline of 3.9 percent compared to the fourth quarter in 2012. The decline primarily reflects lower expenses in the Publishing Segment due to continued efficiency efforts.
Total operating revenues for the full year totaled $5.16 billion, a decline of 2.4 percent compared to 2012. The decline was primarily due to the relative absence of a record $150 million in political advertising and $37 million associated with the Summer Olympic Games generated during 2012. Total company revenues excluding the incremental impact of political and Olympic advertising were up slightly. Broadcasting Segment revenues were 6.8 percent lower in 2013 as a significant increase in retransmission revenue was offset by significantly lower political advertising and the incremental impact of the absence of Olympic spending. Television revenues, excluding the incremental impact of political and Olympic advertising, were 14.3 percent higher. Digital Segment revenues were up 4.1 percent due to stronger results at CareerBuilder. Company-wide digital revenues totaled $1.47 billion, an increase of 16.8 percent compared to 2012. Publishing Segment revenues were down 2.6 percent as a 2.9 percent increase in circulation revenues partially offset a 5.4 percent decline in advertising revenue. The increase in circulation revenue represents the second consecutive year of higher circulation revenues and reflects the impact of the All Access Content Subscription Model.
Operating expenses in 2013 on a non-GAAP basis were 0.9 percent lower reflecting continued efficiency efforts. Operating cash flow totaled $1.04 billion in 2013. On a non-GAAP basis, operating income in 2013 was $855.4 million and net income attributable to Gannett totaled $473.4 million. Earnings per diluted share on the same basis were $2.02.
PUBLISHING
All of the comparative results detailed below exclude the extra week in the fourth quarter of 2012 and special items.
Operating revenues in the Publishing Segment were $944.3 million in the quarter, a 4.6 percent decline due to lower advertising demand and challenging circulation revenue comparisons which reflect the impact of the All Access Content Subscription Model.
Advertising revenues were 5.9 percent lower and totaled $589.6 million reflecting secular pressures as well as the relatively slow pace of the economic recovery. Retail and national category comparisons were in line with third quarter comparisons. Classified advertising comparisons in the quarter were slightly better than third quarter comparisons reflecting improved automotive and employment comparisons. A summary of the year-over-year percent change for the company's advertising categories can be found in Table 5.
Circulation revenues totaled $288.4 million in the quarter, a decline of 1.6 percent compared to the fourth quarter of 2012. The decline reflects higher circulation revenue at Newsquest due to increases in cover prices as they continue to reposition their publications offset by lower circulation revenue at local domestic publishing operations.
Publishing Segment digital revenues were 10.8 percent higher in the quarter reflecting the impact of digital advertising and marketing solutions. Digital revenues at local domestic publishing operations were 8.8 percent higher, while at Newsquest in the UK they were up 18.7 percent, in pounds, and at USA TODAY and its associated businesses, they increased 8.9 percent.
Publishing Segment operating expenses were 5.5 percent lower than the fourth quarter in 2012 due primarily to continued efficiency efforts.
Non-GAAP operating income totaled $143.6 million in the quarter and operating cash flow was $170.6 million. Operating income was up slightly while operating cash flow was down 1.1 percent.
BROADCASTING
All of the comparative results for the Broadcasting Segment detailed below exclude the extra week in the fourth quarter of 2012, special items and Captivate's operating results in both years.
Revenues in the Broadcasting Segment totaled $228.2 million, down 15.7 percent from the fourth quarter in 2012. The decline was driven primarily by the absence of $85.8 million of incremental politically related advertising during the fourth quarter of 2012 partially offset by a substantial increase in retransmission revenue.
Retransmission revenues were $38.9 million in the quarter, an increase of 31.5 percent from the fourth quarter in 2012. Television station digital revenues were up 40.3 percent reflecting growth in digital marketing services. Excluding the incremental impact of political spending in the quarter, Broadcasting Segment revenues would have been 23.4 percent higher.
Based on current trends and including a full quarter of results for the former Belo stations, total television revenues are projected to increase almost 100 percent in the first quarter of 2014 compared to the first quarter of 2013. On a pro forma basis, the percentage increase in total television revenues in the first quarter of 2014 is projected to be in the high teens compared to the first quarter of 2013.
Broadcasting Segment operating expenses were down 1.1 percent compared to the fourth quarter in 2012. Non-GAAP operating income totaled $111.0 million while operating cash flow on the same basis was $118.7 million.
DIGITAL
Digital Segment operating revenues totaled $195.6 million, up 4.4 percent compared to $187.2 million in the fourth quarter in 2012. Strong revenue growth at CareerBuilder contributed to the increase. Digital Segment operating expenses were $168.2 million compared to $238.3 million in the fourth quarter in 2012. The decrease reflects a significantly reduced amount of special items in the fourth quarter compared to the fourth quarter a year ago. Digital Segment operating expenses excluding special items were 5.7 percent higher. On the same basis, operating income was $38.9 million, relatively unchanged from the fourth quarter in 2012, while operating cash flow was $46.9 million. Digital Segment results reflect revenue growth of 7.3 percent at CareerBuilder and a mid-single digit increase in their operating income as well as continued investment in the repositioning of our PointRoll business.
Digital revenues company-wide, which include the Digital Segment and all digital revenues generated by the other business segments, reached $390.6 million, 6.1 percent higher than the fourth quarter a year ago. Excluding the extra week in the fourth quarter of 2012, digital revenues company-wide were 8.3 percent higher. The increase was driven primarily by higher revenue associated with digital advertising and marketing solutions across all segments.
At the end of the quarter, Gannett had about 120 domestic web sites affiliated with its local publishing and television markets, USA TODAY, Gannett Government Media and Gannett Healthcare Group. In December, Gannett's consolidated domestic Internet audience share increased 19.7 percent from December of 2012 to 65.4 million unique visitors reaching 29.2 percent of the Internet audience, according to Comscore Media Metrix. USATODAY.com is one of the most popular news sites and the USA TODAY app is a top news app with 19.4 million downloads across iPad, iPhone, Android, Windows and Kindle Fire. USA TODAY mobile traffic continues to grow as total pages views in December were up 13 percent from December in 2012 to approximately 589 million while monthly visitors increased 89 percent to approximately 24 million. Newsquest is also an Internet leader in the UK where its network of web sites attracted 99.9 million monthly page impressions from approximately 15.3 million unique users in December 2013.
NON-OPERATING ITEMS
The company's equity earnings include its share of operating results from unconsolidated investees including the California Newspapers Partnership, Texas-New Mexico Newspapers Partnership, Tucson newspaper partnership and other online/digital businesses including Classified Ventures.
Equity income in unconsolidated investments was $14.9 million, an increase of $8.5 million from the fourth quarter in 2012. The increase was due, in part, to special items that impacted equity income in fourth quarter in 2012. Excluding special non-cash charges, equity income would have been $4.7 million higher reflecting improved results in our newspaper partnerships as well as Classified Ventures.
Interest expense was $62.9 million compared to $38.9 million in the fourth quarter in 2012. The increase reflects primarily the issuance of $1.85 billion in senior notes during the third and fourth quarters of 2013 primarily related to the Belo transaction. In July, the company issued $600 million in senior notes with a coupon of 5.125 percent with a 2020 maturity date. The company issued $1.25 billion in fixed rate debt in October comprised of $600 million maturing in 2019 with a coupon of 5.125 percent and $650 million maturing in 2023 with a coupon of 6.375 percent.
Other non-operating expense totaled $18.9 million for the quarter compared to income of $6.0 million in the fourth quarter in 2012. The decline is due primarily to special items in the fourth quarter of 2013 associated with transaction-related fees. Excluding special charges, other non-operating income was $4.0 million lower reflecting primarily investment gains in the fourth quarter in 2012.
Free cash flow (a non-GAAP measure) totaled $153.4 million in the quarter (see Table 11). The balance of long term debt at quarter end was $3.7 billion. Total cash at the end of the quarter was $469 million.
During the fourth quarter, the company repurchased approximately 1.4 million shares for $37.9 million. For the full year 2013, shares repurchased totaled 4.9 million shares for $116.6 million.
UPDATED ASSUMPTIONS
As noted, the company closed on its acquisition of Belo on December 23, 2013. As a result, several operating assumptions for 2014 have been updated to reflect the inclusion of all businesses.
-- Capital expenditures are expected to be $140 million to $150 million.
-- Depreciation is projected to be approximately $190 million.
-- Amortization will be approximately $50 million to $60 million.
-- The tax rate in 2014 is projected to be approximately 33 percent.
-- Retransmission revenue is expected to be $330 million to $340 million.
(1)Reported results reflect a 13-week fourth quarter in 2013 compared to a 14-week fourth quarter in 2012; full year results reflect 52 weeks in 2013 compared to 53 weeks in 2012.
USE OF NON-GAAP INFORMATION
The company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation from or as a substitute for the related GAAP measures, and should be read in conjunction with financial information presented on a GAAP basis.
In this earnings report, the company discusses non-GAAP financial performance measures that exclude from its reported GAAP results the impact of special items consisting of workforce restructuring charges, transformation costs, non-cash asset impairment charges, a non-cash charge related to a change in control and sale of interests in a business, non-cash charges related to certain investments accounted for under the equity method, a currency-related loss recognized in other non-operating items and certain credits to its income tax provision. The company believes that such expenses, charges and credits are not indicative of normal, ongoing operations and their inclusion in results makes for more difficult comparisons between periods and with peer group companies.
Workforce restructuring expenses primarily related to incremental expenses the company has incurred to consolidate or outsource production processes and centralize other functions. These expenses include payroll and related benefit costs. Transformation costs include incremental expenses incurred by the Company to execute on its transformation and growth plan, including those related to the Company's recently completed Belo acquisition and incremental expenses associated with optimizing the Company's real estate portfolio. Non-cash asset impairment charges were recorded to reduce the book value of certain intangible assets and investments accounted for under the equity method to fair value, as the businesses underlying these assets had experienced significant and sustained unfavorable operating results. Other non-operating charges include a non-cash charge related to the change in control and sale of interests in the Company's Captivate business and a currency loss in the first quarter of 2013 related to the weakening of the British pound associated with the downgrade of the U.K. sovereign credit rating. Full year results for 2013 included credits to the income tax provision related to reserve releases as a result of a federal exam resolution and lapse of a statute of limitation. Full year results for 2012 included a credit related primarily to tax settlements covering multiple years.
The company also discusses operating cash flow, a non-GAAP financial performance measure that it believes offers a useful view of the overall operation of its businesses. This non-GAAP measure is calculated by adding amounts associated with the special expense items described above, as well as depreciation and amortization, to operating income as reported on a GAAP basis. This earnings report also discusses free cash flow, a non-GAAP liquidity measure. Free cash flow is defined as "net cash flow from operating activities" as reported on the statement of cash flows reduced by "purchase of property, plant and equipment" as well as "payments for investments" and increased by "proceeds from investments." The company believes that free cash flow is a useful measure for management and investors to evaluate the level of cash generated by operations and the ability of its operations to fund investments in its businesses, repay indebtedness, add to the company's cash balance, or use in other discretionary activities. Management uses free cash flow to monitor cash available for repayment of indebtedness and in its discussions with the investment community.
Management uses non-GAAP financial performance measures for purposes of evaluating business unit and consolidated company performance. The company therefore believes that each of the non-GAAP measures presented provides useful information to investors by allowing them to view the company's businesses through the eyes of management and the Board of Directors, facilitating comparison of results across historical periods, and providing a focus on the underlying ongoing operating performance of its businesses. In addition, many of the company's peer group companies present similar non-GAAP measures to better facilitate industry comparisons.
Tabular reconciliations for the non-GAAP financial measures are contained in Tables 6 through 11 attached to this news release.
As previously announced, the company will hold an earnings conference call at 10:00 a.m. ET today. The call can be accessed via a live webcast through the company's web site, www.gannett.com, or listen-only conference lines. U.S. callers should dial 1-888-221-9542 and international callers should dial 913-312-1471 at least 10 minutes prior to the scheduled start of the call. The confirmation code for the conference call is 1263292. To access the replay, dial 1-888-203-1112 in the U.S. International callers should use the number 719-457-0820. The confirmation code for the replay is 1263292. Materials related to the call will be available through the Investor Relations section of the company's web site Tuesday morning.
Forward Looking Statements
Certain statements in this press release may be forward looking in nature or "forward looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The forward looking statements contained in this press release are subject to a number of risks, trends and uncertainties that could cause actual performance to differ materially from these forward looking statements. A number of those risks, trends and uncertainties are discussed in the company's SEC reports, including their annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward looking statements in this press release should be evaluated in light of these important risk factors.
Gannett is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this press release by wire services, Internet service providers or other media.
About Gannett
Gannett Co., Inc. is an international media and marketing solutions company that informs and engages more than 110 million people every month through its powerful network of broadcast, digital, mobile and publishing properties. Our portfolio of trusted brands offers marketers unmatched local-to-national reach and customizable, innovative marketing solutions across any platform. Gannett is committed to connecting people - and the companies who want to reach them - with their interests and communities. For more information, visit www.gannett.com.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
Table No. 1
Thirteen Fourteen % Increase
weeks ended weeks ended (Decrease)
Dec. 29, 2013 Dec. 30, 2012
------------- -------------
Net operating revenues:
Publishing advertising $589,555 $657,546 (10.3)
Publishing circulation 288,434 313,113 (7.9)
All other Publishing 66,272 72,890 (9.1)
Broadcasting 228,207 287,511 (20.6)
Digital 195,570 187,249 4.4
Total 1,368,038 1,518,309 (9.9)
--------- --------- ----
Operating expenses:
Cost of sales and operating
expenses, exclusive of
depreciation 722,487 779,777 (7.3)
Selling, general and
administrative expenses,
exclusive of depreciation 341,451 360,422 (5.3)
Depreciation 37,615 40,426 (7.0)
Amortization of intangible
assets 9,802 9,291 5.5
Facility consolidation and
asset impairment charges 43,077 108,013 (60.1)
------ -------
Total 1,154,432 1,297,929 (11.1)
Operating income 213,606 220,380 (3.1)
------- ------- ----
Non-operating (expense) income:
Equity income in unconsolidated
investees, net 14,895 6,407 ***
Interest expense (62,857) (38,927) 61.5
Other non-operating items (18,936) 6,046 ***
------- -----
Total (66,898) (26,474) ***
------- ------- ---
Income before income taxes 146,708 193,906 (24.3)
Provision for income taxes 41,500 78,900 (47.4)
------ ------
Net income 105,208 115,006 (8.5)
Net income attributable to
noncontrolling interests (14,461) (11,921) 21.3
------- -------
Net income attributable to
Gannett Co., Inc. $90,747 $103,085 (12.0)
======= ======== =====
Net income per share - basic $0.40 $0.45 (11.1)
Net income per share - diluted $0.39 $0.44 (11.4)
Weighted average number of
common shares outstanding:
Basic 227,343 229,368 (0.9)
Diluted 232,585 233,980 (0.6)
Dividends declared per share $0.20 $0.20 -
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands (except per share amounts)
Table No. 2
Fifty-two Fifty-three % Increase
weeks ended weeks ended (Decrease)
Dec. 29, 2013 Dec. 30, 2012
------------- -------------
Net operating revenues:
Publishing advertising $2,198,719 $2,355,922 (6.7)
Publishing circulation 1,129,060 1,117,042 1.1
All other Publishing 250,025 255,180 (2.0)
Broadcasting 835,113 906,104 (7.8)
Digital 748,445 718,949 4.1
Total 5,161,362 5,353,197 (3.6)
--------- --------- ----
Operating expenses:
Cost of sales and operating
expenses, exclusive of
depreciation 2,882,449 2,943,847 (2.1)
Selling, general and
administrative expenses,
exclusive of depreciation 1,291,858 1,303,427 (0.9)
Depreciation 153,203 160,746 (4.7)
Amortization of intangible
assets 36,369 33,293 9.2
Facility consolidation and
asset impairment charges 58,240 122,129 (52.3)
------ -------
Total 4,422,119 4,563,442 (3.1)
Operating income 739,243 789,755 (6.4)
------- ------- ----
Non-operating (expense) income:
Equity income in unconsolidated
investees, net 43,824 22,387 95.8
Interest expense (176,064) (150,469) 17.0
Other non-operating items (47,890) 8,734 ***
------- -----
Total (180,130) (119,348) 50.9
-------- -------- ----
Income before income taxes 559,113 670,407 (16.6)
Provision for income taxes 113,200 195,400 (42.1)
------- -------
Net income 445,913 475,007 (6.1)
Net income attributable to
noncontrolling interests (57,233) (50,727) 12.8
------- -------
Net income attributable to
Gannett Co., Inc. $388,680 $424,280 (8.4)
======== ======== ====
Net income per share - basic $1.70 $1.83 (7.1)
Net income per share - diluted $1.66 $1.79 (7.3)
Weighted average number of
common shares outstanding:
Basic 228,541 232,327 (1.6)
Diluted 234,189 236,690 (1.1)
Dividends declared per share $0.80 $0.80 -
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 3
Thirteen Fourteen % Increase
weeks ended weeks ended (Decrease)
Dec. 29, 2013 Dec. 30, 2012
------------- -------------
Net operating revenues:
Publishing $944,261 $1,043,549 (9.5)
Broadcasting 228,207 287,511 (20.6)
Digital 195,570 187,249 4.4
Total $1,368,038 $1,518,309 (9.9)
========== ========== ====
Operating income (net of
depreciation, amortization
and facility consolidation
and asset impairment
charges):
Publishing $105,624 $128,662 (17.9)
Broadcasting 96,337 157,935 (39.0)
Digital 27,333 (51,006) ***
Corporate (15,688) (15,211) 3.1
Total $213,606 $220,380 (3.1)
======== ======== ====
Depreciation, amortization
and facility consolidation
and asset impairment
charges:
Publishing $57,546 $47,524 21.1
Broadcasting 8,657 6,894 25.6
Digital 19,616 99,364 (80.3)
Corporate 4,675 3,948 18.4
Total $90,494 $157,730 (42.6)
======= ======== =====
Operating cash flow:
Publishing $163,170 $176,186 (7.4)
Broadcasting 104,994 164,829 (36.3)
Digital 46,949 48,358 (2.9)
Corporate (11,013) (11,263) (2.2)
Total $304,100 $378,110 (19.6)
======== ======== =====
Operating cash flow represents operating income from each of the company's business segments plus related depreciation, amortization and facility consolidation and asset impairment charges. See Table No. 10 for reconciliation of amounts to the Condensed Consolidated Statements of Income.
BUSINESS SEGMENT INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 4
Fifty-two Fifty-three % Increase
weeks ended weeks ended (Decrease)
Dec. 29, 2013 Dec. 30, 2012
------------- -------------
Net operating revenues:
Publishing $3,577,804 $3,728,144 (4.0)
Broadcasting 835,113 906,104 (7.8)
Digital 748,445 718,949 4.1
Total $5,161,362 $5,353,197 (3.6)
========== ========== ====
Operating income (net of
depreciation, amortization
and facility consolidation
and asset impairment
charges):
Publishing $313,697 $368,644 (14.9)
Broadcasting 361,915 443,808 (18.5)
Digital 128,264 41,700 ***
Corporate (64,633) (64,397) 0.4
Total $739,243 $789,755 (6.4)
======== ======== ====
Depreciation, amortization
and facility consolidation
and asset impairment
charges:
Publishing $153,380 $147,750 3.8
Broadcasting 29,625 28,007 5.8
Digital 46,415 123,990 (62.6)
Corporate 18,392 16,421 12.0
Total $247,812 $316,168 (21.6)
======== ======== =====
Operating cash flow:
Publishing $467,077 $516,394 (9.6)
Broadcasting 391,540 471,815 (17.0)
Digital 174,679 165,690 5.4
Corporate (46,241) (47,976) (3.6)
Total $987,055 $1,105,923 (10.7)
======== ========== =====
Operating cash flow represents operating income from each of the company's business segments plus related depreciation, amortization and facility consolidation and asset impairment charges. See Table No. 10 for reconciliation of amounts to the Condensed Consolidated Statements of Income.
PUBLISHING SEGMENT REVENUE COMPARISONS
Gannett Co., Inc. and Subsidiaries
Unaudited
Table No. 5
The percentage changes for the Publishing segment advertising and classified revenue categories excluding the extra week in the fourth quarter of 2012 were as follows:
Fourth quarter 2013 year-over-year advertising comparisons:
U.S. Newsquest Total Total
Publishing (in pounds) Publishing Publishing
(including USA segment segment
TODAY)
(constant currency)
---
Retail (4.6%) (4.2%) (4.6%) (4.5%)
National (10.4%) (7.6%) (10.2%) (10.1%)
Classified (5.2%) (7.9%) (5.9%) (5.7%)
Total advertising (5.9%) (6.5%) (6.0%) (5.9%)
===== ===== ===== =====
Year-to-date 2013 year-over-year advertising comparisons:
U.S. Newsquest Total Total
Publishing (in pounds) Publishing Publishing
(including USA segment segment
TODAY)
(constant currency)
---
Retail (4.5%) (3.3%) (4.4%) (4.6%)
National (6.0%) (14.8%) (6.7%) (6.8%)
Classified (5.2%) (7.7%) (5.9%) (6.2%)
Total advertising (5.0%) (6.8%) (5.3%) (5.4%)
===== ===== ===== =====
Fourth quarter 2013 year-over-year classified comparisons:
U.S. Newsquest Total Total
Publishing (in pounds) Publishing Publishing
(including USA segment segment
TODAY)
(constant currency)
---
Automotive 2.5% (7.0%) 1.4% 1.5%
Employment (10.1%) (1.2%) (7.3%) (7.2%)
Real Estate (4.3%) (12.0%) (7.0%) (6.8%)
Legal (21.3%) -% (21.3%) (21.3%)
Other (6.3%) (10.6%) (7.7%) (7.5%)
Total classified (5.2%) (7.9%) (5.9%) (5.7%)
===== ===== ===== =====
Year-to-date 2013 year-over-year classified comparisons:
U.S. Newsquest Total Total
Publishing (in pounds) Publishing Publishing
(including USA TODAY) segment segment
(constant currency)
---
Automotive (0.4%) (9.1%) (1.5%) (1.6%)
Employment (9.0%) (3.9%) (7.4%) (7.9%)
Real Estate (3.8%) (9.3%) (5.9%) (6.4%)
Legal (12.1%) -% (12.1%) (12.1%)
Other (5.8%) (9.0%) (6.9%) (7.3%)
Total classified (5.2%) (7.7%) (5.9%) (6.2%)
===== ===== ===== =====
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
The company uses non-GAAP financial performance and liquidity measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures are not to be considered in isolation from or as a substitute for the related GAAP measures and should be read only in conjunction with financial information presented on a GAAP basis.
Tables No. 6 through No. 11 reconcile these non-GAAP measures to the most directly comparable GAAP measure.
Table No. 6
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Thirteen Workforce Transformation Asset
costs impairment
charges Thirteen
weeks ended restructuring weeks ended
Dec. 29, 2013 Dec. 29, 2013
------------- -------------
Cost of sales and operating expenses, exclusive of depreciation $722,487 $(7,164) $ - $ - $715,323
Selling, general and administrative expenses, exclusive of depreciation 341,451 (14,405) - - 327,046
Facility consolidation and asset impairment charges 43,077 - (10,081) (32,996) -
Operating expenses 1,154,432 (21,569) (10,081) (32,996) 1,089,786
Operating income 213,606 21,569 10,081 32,996 278,252
Other non-operating items (18,936) - 20,985 - 2,049
Total non-operating (expense) income (66,898) - 20,985 - (45,913)
Income before income taxes 146,708 21,569 31,066 32,996 232,339
Provision for income taxes 41,500 6,400 4,200 13,300 65,400
Net income 105,208 15,169 26,866 19,696 166,939
Net income attributable to Gannett Co., Inc. 90,747 15,169 26,866 19,696 152,478
Net income per share - diluted $0.39 $0.07 $0.12 $0.08 $0.66
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Fourteen Workforce Transformation Asset
costs impairment
charges Fourteen
weeks ended restructuring weeks ended
Dec. 30, 2012 Dec. 30, 2012
------------- -------------
Cost of sales and operating expenses, exclusive of depreciation $779,777 $(5,909) $ - $ - $773,868
Selling, general and administrative expenses, exclusive of depreciation 360,422 (686) - - 359,736
Facility consolidation and asset impairment charges 108,013 - (17,960) (90,053) -
Operating expenses 1,297,929 (6,595) (17,960) (90,053) 1,183,321
Operating income 220,380 6,595 17,960 90,053 334,988
Equity income (loss) in unconsolidated investees, net 6,407 - - 3,816 10,223
Total non-operating (expense) income (26,474) - - 3,816 (22,658)
Income before income taxes 193,906 6,595 17,960 93,869 312,330
Provision for income taxes 78,900 2,400 6,800 5,000 93,100
Net income 115,006 4,195 11,160 88,869 219,230
Net income attributable to Gannett Co., Inc. 103,085 4,195 11,160 88,869 207,309
Net income per share - diluted $0.44 $0.02 $0.05 $0.38 $0.89
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars (except per share amounts)
Table No. 7
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Fifty-two Workforce Transformation Asset Other non-
costs impairment operating
charges items Special tax Fifty-two
weeks ended restructuring benefits weeks ended
Dec. 29, 2013 Dec. 29, 2013
------------- -------------
Cost of sales and operating expenses, exclusive of depreciation $2,882,449 $(36,856) $ - $ - $ - $ - $2,845,593
Selling, general and administrative expenses, exclusive of depreciation 1,291,858 (21,052) - - - - 1,270,806
Facility consolidation and asset impairment charges 58,240 - (25,244) (32,996) - - -
Operating expenses 4,422,119 (57,908) (25,244) (32,996) - - 4,305,971
Operating income 739,243 57,908 25,244 32,996 - - 855,391
Equity income in unconsolidated investees, net 43,824 - - 731 - - 44,555
Other non-operating items (47,890) - 35,796 - 18,690 6,596
Total non-operating (expense) income (180,130) - 35,796 731 18,690 - (124,913)
Income before income taxes 559,113 57,908 61,040 33,727 18,690 - 730,478
Provision for income taxes 113,200 20,700 16,100 13,600 8,400 27,800 199,800
Net income 445,913 37,208 44,940 20,127 10,290 (27,800) 530,678
Net income attributable to Gannett Co., Inc. 388,680 37,208 44,940 20,127 10,290 (27,800) 473,445
Net income per share - diluted $1.66 $0.16 $0.19 $0.09 $0.04 $(0.12) $2.02
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Fifty-three Workforce Transformation Asset
costs impairment
charges Special tax Fifty-three
weeks ended restructuring benefits weeks ended
Dec. 30, 2012 Dec. 30, 2012
------------- -------------
Cost of sales and operating expenses, exclusive of depreciation $2,943,847 $(34,679) $ - $ - $ - $2,909,168
Selling, general and administrative expenses, exclusive of depreciation 1,303,427 (13,837) - - - 1,289,590
Facility consolidation and asset impairment charges 122,129 - (32,076) (90,053) - -
Operating expenses 4,563,442 (48,516) (32,076) (90,053) - 4,392,797
Operating income 789,755 48,516 32,076 90,053 - 960,400
Equity income in unconsolidated investees, net 22,387 - - 7,036 - 29,423
Total non-operating (expense) income (119,348) - - 7,036 - (112,312)
Income before income taxes 670,407 48,516 32,076 97,089 - 848,088
Provision for income taxes 195,400 19,100 12,500 6,200 13,100 246,300
Net income 475,007 29,416 19,576 90,889 (13,100) 601,788
Net income attributable to Gannett Co., Inc. 424,280 29,416 19,576 90,889 (13,100) 551,061
Net income per share - diluted (a) $1.79 $0.12 $0.08 $0.38 $(0.06) $2.33
(a) Total per share amount does not sum due to rounding.
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 8
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Thirteen Workforce Transformation Asset impairment
costs charges Thirteen
weeks ended restructuring weeks ended
Dec. 29, 2013 Dec. 29, 2013
------------- -------------
Operating income:
Publishing $105,624 $7,437 $9,187 $21,382 $143,630
Broadcasting 96,337 13,729 894 - 110,960
Digital 27,333 - - 11,614 38,947
Corporate (15,688) 403 - - (15,285)
Total $213,606 $21,569 $10,081 $32,996 $278,252
======== ======= ======= ======= ========
Depreciation, amortization and facility consolidation and asset impairment charges:
Publishing $57,546 $ - $(9,187) $(21,382) $26,977
Broadcasting 8,657 - (894) - 7,763
Digital 19,616 - - (11,614) 8,002
Corporate 4,675 - - - 4,675
Total $90,494 $ - $(10,081) $(32,996) $47,417
======= === === ======== ======== =======
Operating cash flow (a):
Publishing $163,170 $7,437 $ - $ - $170,607
Broadcasting 104,994 13,729 - - 118,723
Digital 46,949 - - - 46,949
Corporate (11,013) 403 - - (10,610)
Total $304,100 $21,569 $ - $ - $325,669
======== ======= === === === === ========
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Fourteen Workforce Transformation Asset impairment
costs charges Fourteen
weeks ended restructuring weeks ended
Dec. 30, 2012 Dec. 30, 2012
------------- -------------
Operating income:
Publishing $128,662 $6,595 $17,960 $ - $153,217
Broadcasting 157,935 - - - 157,935
Digital (51,006) - - 90,053 39,047
Corporate (15,211) - - - (15,211)
Total $220,380 $6,595 $17,960 $90,053 $334,988
======== ====== ======= ======= ========
Depreciation, amortization and facility consolidation and asset impairment charges:
Publishing $47,524 $ - $(17,960) $ - $29,564
Broadcasting 6,894 - - - 6,894
Digital 99,364 - - (90,053) 9,311
Corporate 3,948 - - - 3,948
Total $157,730 $ - $(17,960) $(90,053) $49,717
======== === === ======== ======== =======
Operating cash flow (a):
Publishing $176,186 $6,595 $ - $ - $182,781
Broadcasting 164,829 - - - 164,829
Digital 48,358 - - - 48,358
Corporate (11,263) - - - (11,263)
Total $378,110 $6,595 $ - $ - $384,705
======== ====== === === === === ========
(a) Refer to Table No. 10
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 9
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Fifty-two Workforce Transformation Asset impairment
costs charges Fifty-two
weeks ended restructuring weeks ended
Dec. 29, 2013 Dec. 29, 2013
------------- -------------
Operating income:
Publishing $313,697 $43,137 $24,211 $21,382 $402,427
Broadcasting 361,915 14,368 1,033 - 377,316
Digital 128,264 - - 11,614 139,878
Corporate (64,633) 403 - - (64,230)
Total $739,243 $57,908 $25,244 $32,996 $855,391
======== ======= ======= ======= ========
Depreciation, amortization and facility consolidation and asset impairment charges:
Publishing $153,380 $ - $(24,211) $(21,382) $107,787
Broadcasting 29,625 - (1,033) - 28,592
Digital 46,415 - - (11,614) 34,801
Corporate 18,392 - - - 18,392
Total $247,812 $ - $(25,244) $(32,996) $189,572
======== === === ======== ======== ========
Operating cash flow (a):
Publishing $467,077 $43,137 $ - $ - $510,214
Broadcasting 391,540 14,368 - - 405,908
Digital 174,679 - - - 174,679
Corporate (46,241) 403 - - (45,838)
Total $987,055 $57,908 $ - $ - $1,044,963
======== ======= === === === === ==========
GAAP Special Items Non-GAAP
Measure Measure
------- -------
Fifty-three Workforce Transformation Asset impairment
costs charges Fifty-three
weeks ended restructuring weeks ended
Dec. 30, 2012 Dec. 30, 2012
------------- -------------
Operating income:
Publishing $368,644 $42,226 $32,076 $ - $442,946
Broadcasting 443,808 - - - 443,808
Digital 41,700 - - 90,053 131,753
Corporate (64,397) 6,290 - - (58,107)
Total $789,755 $48,516 $32,076 $90,053 $960,400
======== ======= ======= ======= ========
Depreciation, amortization and facility consolidation and asset impairment charges:
Publishing $147,750 $ - $(32,076) $ - $115,674
Broadcasting 28,007 - - - 28,007
Digital 123,990 - - (90,053) 33,937
Corporate 16,421 - - - 16,421
Total $316,168 $ - $(32,076) $(90,053) $194,039
======== === === ======== ======== ========
Operating cash flow (a):
Publishing $516,394 $42,226 $ - $ - $558,620
Broadcasting 471,815 - - - 471,815
Digital 165,690 - - - 165,690
Corporate (47,976) 6,290 - - (41,686)
Total $1,105,923 $48,516 $ - $ - $1,154,439
========== ======= === === === === ==========
(a) Refer to Table No. 10
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 10
"Operating cash flow", a non-GAAP measure, is defined as operating income plus depreciation, amortization and facility consolidation and asset impairment charges. Management believes that use of this measure allows investors and management to measure, analyze and compare the performance of its business segment operations at a more detailed
level and in a meaningful and consistent manner.
Reconciliations of these non-GAAP amounts to the company's operating income, which the company believes is the most directly comparable financial measure calculated and presented in accordance with GAAP on the company's condensed consolidated statements of income, follow:
Thirteen weeks ended Dec. 29, 2013:
Publishing Broadcasting Digital Corporate Consolidated
Total
-----
Operating cash flow $163,170 $104,994 $46,949 $(11,013) $304,100
Less:
Depreciation (22,821) (5,836) (4,283) (4,675) (37,615)
Amortization (4,156) (1,927) (3,719) - (9,802)
Facility consolidation and asset impairment charges (30,569) (894) (11,614) - (43,077)
Operating income as reported (GAAP basis) $105,624 $96,337 $27,333 $(15,688) $213,606
======== ======= ======= ======== ========
Fourteen weeks ended Dec. 30, 2012:
Publishing Broadcasting Digital Corporate Consolidated
Total
-----
Operating cash flow $176,186 $164,829 $48,358 $(11,263) $378,110
Less:
Depreciation (25,324) (6,713) (4,441) (3,948) (40,426)
Amortization (4,240) (181) (4,870) - (9,291)
Facility consolidation and asset impairment charges (17,960) - (90,053) - (108,013)
Operating income as reported (GAAP basis) $128,662 $157,935 $(51,006) $(15,211) $220,380
======== ======== ======== ======== ========
Fifty-two weeks ended Dec. 29, 2013:
Publishing Broadcasting Digital Corporate Consolidated
Total
-----
Operating cash flow $467,077 $391,540 $174,679 $(46,241) $987,055
Less:
Depreciation (91,122) (26,130) (17,559) (18,392) (153,203)
Amortization (16,665) (2,462) (17,242) - (36,369)
Facility consolidation and asset impairment charges (45,593) (1,033) (11,614) - (58,240)
Operating income as reported (GAAP basis) $313,697 $361,915 $128,264 $(64,633) $739,243
======== ======== ======== ======== ========
Fifty-three weeks ended Dec. 30, 2012:
Publishing Broadcasting Digital Corporate Consolidated
Total
-----
Operating cash flow $516,394 $471,815 $165,690 $(47,976) $1,105,923
Less:
Depreciation (100,109) (27,282) (16,934) (16,421) (160,746)
Amortization (15,565) (725) (17,003) - (33,293)
Facility consolidation and asset impairment charges (32,076) - (90,053) - (122,129)
Operating income as reported (GAAP basis) $368,644 $443,808 $41,700 $(64,397) $789,755
======== ======== ======= ======== ========
NON-GAAP FINANCIAL INFORMATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 11
"Free cash flow" is a non-GAAP liquidity measure used in addition to and in conjunction with results presented in
accordance with GAAP. Free cash flow should not be relied upon to the exclusion of GAAP financial measures.
Free cash flow is a non-GAAP liquidity measure that is defined as "Net cash flow from operating activities" as reported on
the statement of cash flows reduced by "Purchase of property, plant and equipment" as well as "Payments for investments"
and increased by "Proceeds from investments" and voluntary pension contributions, net of related tax benefit. The company
believes that free cash flow is a useful measure for management and investors to evaluate the level of cash generated by
operations and the ability of its operations to fund investments in new and existing businesses, return cash to
shareholders under the company's capital program, repay indebtedness, add to the company's cash balance, or to use in other
discretionary activities. Management uses free cash flow to monitor cash available for repayment of indebtedness and in its
discussions with the investment community.
Thirteen Fifty-two
weeks ended weeks ended
Dec. 29, 2013 Dec. 29, 2013
------------- -------------
Net cash flow from
operating
activities $162,530 $511,488
Purchase of
property, plant
and equipment (37,739) (110,407)
Voluntary pension
employer
contributions - 15,507
Tax benefit for
voluntary pension
employer
contributions - (6,125)
Payments for
investments - (3,380)
Proceeds from
investments 28,629 63,408
Free cash flow $153,420 $470,491
======== ========
TAX RATE CALCULATION
Gannett Co., Inc. and Subsidiaries
Unaudited, in thousands of dollars
Table No. 12
The calculations of the company's effective tax rate on a GAAP and non-GAAP basis are below:
GAAP Non-GAAP
---- --------
Thirteen Fourteen Thirteen Fourteen
weeks ended weeks ended weeks ended weeks ended
Dec. 29, 2013 Dec. 30, 2012 Dec. 29, 2013 Dec. 30, 2012
------------- ------------- ------------- -------------
Income before taxes (per Table 6) $146,708 $193,906 $232,339 $312,330
Noncontrolling interests (per Table 1) (14,461) (11,921) (14,461) (11,921)
------- ------- ------- -------
Income before taxes attributable to Gannett Co., Inc. $132,247 $181,985 $217,878 $300,409
======== ======== ======== ========
Provision for income taxes (per Table 6) $41,500 $78,900 $65,400 $93,100
Effective tax rate 31.4% 43.4% 30.0% 31.0%
GAAP Non-GAAP
---- --------
Fifty-two Fifty-three Fifty-two Fifty-three
weeks ended weeks ended weeks ended weeks ended
Dec. 29, 2013 Dec. 30, 2012 Dec. 29, 2013 Dec. 30, 2012
------------- ------------- ------------- -------------
Income before taxes (per Table 7) $559,113 $670,407 $730,478 $848,088
Noncontrolling interests (per Table 2) (57,233) (50,727) (57,233) (50,727)
------- ------- ------- -------
Income before taxes attributable to Gannett Co., Inc. $501,880 $619,680 $673,245 $797,361
======== ======== ======== ========
Provision for income taxes (per Table 7) $113,200 $195,400 $199,800 $246,300
Effective tax rate 22.6% 31.5% 29.7% 30.9%
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SOURCE Gannett Co., Inc.
